GM plans to invest US$11bn in China

INTO THE HIGH-END:GM is plunging deeper into the world’s largest car market, where it is the No. 1 foreign firm by sales, but has just 2.5 percent of the luxury sector

AFP, SHANGHAI

Excavators are displayed yesterday at the groundbreaking ceremony of a US$1.3 billion General Motors Co Cadillac plant in Shanghai, China.

Photo: AFP

General Motors Co (GM) will invest US$11 billion in China through 2016, executives said yesterday, as the US car giant broke ground on a plant to produce luxury Cadillacs for the world’s biggest auto market.

The figure includes four new plants, including the US$1.3 billion Cadillac factory in Shanghai, GM officials told a media briefing.

“China is a critical market for General Motors today and General Motors tomorrow,” GM chairman and CEO Dan Akerson said.

GM is already the largest foreign auto maker in China by sales, but it has lagged behind in the country’s luxury segment, in which German companies hold an estimated 80 percent share.

GM sold a record 1.33 million vehicles in China in the first five months of the year, up 10.6 percent from the same period last year, according to the company.

The Cadillac plant will have annual output capacity of 160,000 vehicles, with production to start in two years, company officials said.

“We’re going to bring our high-end, premium product here and we’re going to see how we run against the competitors from Europe and Japan,” Akerson said.

GM has already announced plans to introduce one new Cadillac model a year in China through 2016 to boost annual sales of the brand from about 30,000 vehicles last year to 100,000 by 2015.

The US company hopes to capture 10 percent of China’s luxury car market by 2020, up from the current 2.5 percent, GM officials said.

They declined to say what Cadillac models will be produced at the new plant.

GM launched a locally produced Cadillac sedan, the XTS, in China earlier this year and also imports the Cadillac SRX, a sports utility vehicle, for sale in the country.

“There are generous profits in the luxury car market,” Cui Dongshu (崔東樹), deputy head of industry group the China Passenger Car Association, told reporters. “GM has to make an investment targeted at the segment and build this plant in Shanghai to localize its products, in order to effectively seize a place in the high-end segment.”

Speaking at the factory’s groundbreaking ceremony, Akerson forecast China would eventually become the world’s largest luxury car market, with sales of 3 million vehicles.

Consultancy McKinsey & Co Inc puts the Chinese premium auto market at 1.25 million vehicles last year, second only to the US.

Other GM China plants planned for the next three years include one for mini-commercial vehicles in Chongqing, as well as others in the cities of Wuhan and Shenyang, officials said, but did not give details.

China’s overall auto market is expected to grow by between eight and 12 percent over the next four to five years, eventually reaching 30 million vehicles by the end of the decade, Akerson said.